Dividend Report: Jan-Dec

As 2016 draws to the close, I finally have a clearer idea of how much dividends my portfolio generates. This is the first time I'm actually counting the amount.

Not all my ETFs declare dividends. For example, IWDA, XESC, CPJ1 reinvest dividends. So the reinvested dividends do not count towards the dividend total. 

I invested in foreign markets in a major way after BREXIT, so I expect to start collecting the dividends for those purchases next year.  Hopefully my US$ dividend will start growing.

A safe target should be to grow the total dividend from $3,500 to $4,200 in 2017. If there is an inflation-fuelled rally, the dividend might well be higher, but that is just inflation rather than real growth.




Average dividends per month: Jan-Dec 2016:
S$3,185.86
US$67.74  (=$97.55)
£143.06    (=$254.65)

Average dividend all currencies converted to S$  (US1.44 / £1.78)

$3,538.06




Average dividend = Total dividend collected ÷ number of months in the year so far
Different from DK style of total dividend ÷ 12 months  (updated 7 Jan - 30 Dec FHT payment updated)



Previous monthly average:
S$3,254.66    -
US$219.02     -
£156.06        -

Returns after regularly Investing in STI ETF in 2016

When STI ETF dropped from $3.00 to $2.98, got people in the forums think that STI is crashing. If you continued regular DCA of STI ETF in 2016, you will be happy if STI ends at $2.98 at the end of 2016.

What is interesting is that 2016 performance of STI ETF will be influenced by whether you benchmark it against the 30 Dec closing price or the 04 Jan closing price due to window dressing

30 Dec  closing price $2.95
04 Jan   closing price $2.90
(Source Yahoo Finance - hopefully it's accurate)

But whether you look at 04 Jan or 30 Dec closing price, regular investment in STI ETF in the course of the year should bring a positive return (unless STI crashes in the last few weeks of December which is rare because that's the window-dressing period).

Furthermore, STI ETF went ex-Div:

29 Jan - $0.056
29 Jul -  $0.073


2016 STI ETF purchases
Jan      $2.76
Feb     Didn't buy, can't remember why.
Mar     $2.85
Apr     $2.82
May    $2.84
Jun     $2.85
Jul      Didn't buy - all money into BREXIT stocks
Aug    Didn't buy - continuing post BREXIT purchases
Sep     Didn't buy - rebuilding warchest after BREXIT
Oct     $2.85
Nov    $2.83
Dec     Not buying -- too close to $3.00

Dividend Report: Jan-Nov

Nearing the end of the year, not many companies are declaring dividends. As we head into December, it appears that my average dividend per month is just over the $3k mark. 


Average dividends per month: Jan-Nov 2016:
S$3,254.66    -
US$219.02     -
£156.06        -

Average dividend = Total dividend collected ÷ number of months in the year so far
Different from DK style of total dividend ÷ 12 months



Previous monthly average:
S$3,334.63    -
US$221.281  +
£171.67       +

Mid-November update: Watching Grass Grow?

Investing should be more like watching paint dry or watching grass grow. If you want excitement, take your money and go to Las Vegas. - Paul Samuelson

I don't really have an update. Given the sideways nature of the Singapore market that swings between 2800-3000, there is really nothing to do but regular dollar cost averaging and making sure your portfolio is balanced. I have added STI ETF and CCT, that's about it. 



SRS
I opened my SRS account this year as I thought that it would be good to get some tax savings. I haven't topped up my SRS yet but will have to do so by December. Most likely to will top up to the max and buy STI ETF unless STI suddenly rallies to 3,000, in which case I would buy a retail bond like Fraser's Centrepoint. 


Post-US Election portfolio performance
My IBKR portfolio performance 9 Nov (election results) - 25 Nov is a mixed bag but overall positive (just made it into the green zone) thanks to performance of all the financial sector companies I hold as my IBKR portfolio has quite a lot of financials. 

The big drops were telecomms (BT/VOD), and Emerging Markets (EIMI). However, these are fundamentally sound and I should be doing regular top-ups soon... except that I also need to put a lot of money into SRS in December which can't be used for foreign shares.

Year to date, I am quite happy with the portfolio performance. I am not looking for super high returns since I am holding a large diversified portfolio. Will report at the end of the year.

I don't actually have the portfolio performance of my SG shares and its a bit difficult to track with all my constant small purchases using SCB. Maybe when I have the time I will slowly enter in all the data into the google finance spreadsheet.But since I buy STI index components with good dividends or REITs, I would guess that performance follows the STI, which is sideways but at least the dividends are ok and tax-free.

Strategy Report: Post-US Exit

No catchy title for this event? 

In last month's Mid-October Strategy report, I mentioned continuing to DCA STI ETF ES3 @ $2.85. In the last 10 years, I had one rule for ES3: If under $3, continue DCA, if above $3, use money for other things (just nice that I had housing loan to pay off - no lock-in / no partial prepayment penalty).

With STI going below 2,800 again, I continued my monthly DCA with ES3 @ $2.83. Like I've mentioned many times, I got lots of practice averaging down. But ES3 at $2.85 or $2.83, I have no problems doing DCA at those levels. If it went below $2.80 I would consider using some of my CPF.

After SG markets closed, I was wondering whether we would get BREXIT-type discounts when the Atlantic markets opened but it was not to be so I didn't buy anything. While the futures looked impressively scary, the actual markets were not really down much and eventually reversed.

More fundamentally, rate hike and inflation expectations may have changed. I wonder if this was part of the reason for the rally in the 2 out of 3 of the insurers I am vested in. AV and PUK have a lot more international focus than LGEN:

• AV       +4.36%
• PUK     +5.72%
• LGEN   -0.45%

There is no reason to believe that the volatility is over as there are many opportunities for mis-steps and mistakes. For example, the nomination of the correct people to his economic team is probably crucial. For foreign policy, I guess that whoever he nominates will have to work with Boris Johnson across the Atlantic....

SCB PB, the only PB that matters?

Standard Chartered Priority Banking allows you to enjoy 0.18% trading commission for SGX-listed shares and no minimum commission. It also allows you to qualify for PB status based on the value of the shares in your online trading account, which must total $200k.

This makes it the "easiest" PB to get and because of the trading commissions, the only one that matters to a DIY investor. 

At the same time, if the deal is so good, I wonder if it will last. I have no idea, so I'll just enjoy the no minimum commissions until they decide to revise the terms and conditions.

Strategy Report: November

Focus back on Singapore: GLP

In the past few months, I have been focusing on adding foreign stocks and ETFs to my portfolio for diversification and also because I was worried about a weakening S$ and STI underperformance.

However, as I mentioned a few posts ago, STI ETF at $2.85 is a reasonable entry point, and if STI is hovering around 2,800, there could be individual stocks worth adding. If the stock derived a lot of its revenue from overseas, that would be even better. GLP is one such stock.

On 31 Oct, GLP dropped under $1.80. Those who HWZ posts will know that some call GLP a FIFO stock. Meaning you should buy on the dips. My entire holding of GLP was bought under $1.80. After it crossed $1.80, I didn't buy anymore but prepared to sell some if it hit $2. However, since it went under $1.80 again, I bought some more at $1.78 and got ready to average down. 

My overall strategy is to buy a low price so that I can hold for a long time and collect dividends. In contrast, there were some people that didn't buy GLP when it was under $1.80 but instead waited for it to shoot up and followed the trend. Following the trend is fine if you are able to sell when there is a reversal, but not many people can do that. 

I experimented with some FIFO of GLP but 0.18%/0.20% comms does eat into the profits. Maybe stick with FIFO of US stocks where the comm is 0.08% or less.

Dividend Report: Jan-Oct

Hardly any S$ dividends this month.

My quarterly Vanguard Dividends are reported this month (I use Jan/Apr/Jul/Oct as the reporting months - in IBKR they are paid end Sep but reported as Oct payments)


Average dividends per month: Jan-Oct2016:
S$3,334.63    -
US$221.281  +
£171.67       +

Average dividend = Total dividend collected ÷ number of months in the year so far
Different from DK style of total dividend ÷ 12 months



Previous monthly average:
S$3,655.54 -  
US$169.21   -
£146.99      -

Chasing yield is harder and harder to do.

IA considers lower yield target for UK equity income funds

By Sean Butters 20 Oct, 2016

.... The industry body is understood to be consulting members after a number of funds were ejected from the sector in recent years for failing to meet yield requirements. 

... A total of 21 funds have dropped from the current IA UK Equity Income basket into the IA All Companies sector in recent years, including Hugh Yarrow’s (pictured) Evenlode Income and Henry Dixon’s Man GLG UK Income funds.

http://citywire.co.uk/wealth-manager/sector/uk-equity-income-funds/i600/?periodMonths=12&page=1

Chasing yield is harder and harder to do. I am a dividend investor but also a contrarian investor. If investors are hard up about high "current" yield (current yield actually means past yield), then I shall look for counters that give modest yield but have the potential to grow. 

Wonder if those income funds that could not deliver income were the ones that bought too much BHP, which is a classic example of not to be too hard up about dividends, which is almost as important as buying after a crash. 

Of course, the funds probably gave some excuse like they are changing from income strategy to growth strategy or that they were never an income fund in the first place, which is similar to buying a share for short term gain, but when the price drop, you then say that you are a long term buy and hold investor... (cross reference to "sunk cost fallacy").

Strategy Report: Mid-October

Fraser's Hospitality Trust Preferential Share offering results are out. Fewer excess shares received compared to the Mapletree CT offering. My preference at this stage is for REITs with significant overseas revenue to hedge against any SG downturn.

Quarterly DCA of STI ETF at $2.85. I used to buy STI ETF more regularly using SCB. Then I stopped after August because of the $10 min commission. Decided that $2.85 is a decent enough price to buy $5k worth (to optimise the $10 min comm). Hope to restart regular small STI ETF purchases once I get SCB PB.

Sold Lyxor Commodities ETF. I still had some of this ETF left so I finally decided to close my position and take advantage of the small uptick in commodity prices. As commodities do not give dividends, my preference in the future is to look for markets that have a correlation with commodities prices (Australia, Norway). Initiated position in NORW.

Various small topups as part of DCA: Westpac Bank, Prudential, BT

Dividend Report: Jan-Sep 2016

September was a slow month for dividends


Average dividends per month: Jan-Sep 2016:
S$3,655.54 -  
US$169.21   -
£146.99      -


Average dividend = Total dividend collected ÷ number of months in the year so far
Different from DK style of total dividend ÷ 12 months



Previous monthly average:
S$3,855.75 + 
US$170.55   -
£148.14      -

Strategy Report: October 2016

The Cat from Norway, sat in a Doorway: Norway as an Oil Proxy

I had bought and sold oil (aka USO) a long time ago, but due to a variety of reasons including contango, the returns on USO do not mirror oil price movements that well. I managed to exit with a few hundred dollars profit which was too little return for taking on a huge amount of risk. Furthermore, commodities don't declare dividends. 

So one of my investing ideas was to use Australia as a proxy for commodities in general (BHP/Rio etc), though I had no idea whether there was any market that could be a good proxy for oil (Saudi Arabia?).

Attended a talk organised by FSM where the speaker mentioned going long on the Norwegian Krone to express a bullish view on oil as the Krone is an "oil currency." That got me thinking whether some exposure to a Norwegian ETF and thus the underly currency would be useful if I have a long-term bullish view in oil and unsure how to express it (I have a tiny bit of Shell B but the price now is pretty high, also lots of non-systemic risk as apart from Banks, Oil companies are in the news about being fined...)

Buying a US-listed ETF seems to be the simplest way to go about doing this. If I bought direct from Norway, the withholding tax on dividends is about the same and who knows what other taxes... One such ETF would be ENOR from iShares or NORW from GlobalX.

The yield before tax is 4%+ and after withholding tax it drops to about 3%. Looks decent enough to try some buy and hold in order to express a long-term bullish view on oil. Of course, still have to think about the entry point.

Update: NORW is commission-free on IBKR http://etfdb.com/type/commission-free/interactive-brokers/  Of course, if the spread is too large that is also a form of 'hidden charge' but the spread appears comparable to ENOR.


Sembcorp: Averaged down at $2.58

Continuing with the Oil theme, I also averaged down Sembcorp at the end of September at $2.58. I think I have too much Sembcorp but thats the result of Sembcorp's price weakness and my habit of averaging down...

Averaging Down (aka, after I buy, the price always drop)

HSBC is an example of my average down technique. After I buy something, the price drops and I average down. As long as price is below my average buying price, I keep on buying  :s13:

Jan: US$33.28 My very first purchase of HSBC.
Feb: US$31.85 Ok, price drop, just average down.
Feb: US$31.59
Feb: US$31.40
Mar: Too sian, stopped buying HSBC, buy other counters
Apr: US$30.59  HSBC dropped 8% from my Jan buy price! 
Apr: US$29.80  Still dropping? Ok lah, just throw some more money at it. One day will go up above $30. 
May: No purchases.
Jun: US$30.29
Jun: US$29.74  Wah, cannot hold, ok just buy under $30 again, sure go above $30 soon!
Jul: stopped buying once price went above my average buying price
Aug: same

Current price:  US$38.33 + US$0.50 ex-Div in August
Average purchase price: $31.05
% Return including dividend: 25%

My weakness is I don't know how to average up. I look at the HSBC price now and I got no interest in buying more. For upward market, I only know how to DCA and buy ETF regularly. 

Furthermore, in upward market, I will not allocate all to equities. Some of the monthly DCA should be normally allocated to bonds/cash/others as part of asset allocation. However, I would like a little bit more clarity on rate hikes before getting more bonds at this point, because market seems to be pricing in no rate hike, which means that if there is a hike, bonds will drop. 

I prefer to buy after a crash.

Dividend Report: Jan-August 2016

There were zero S$ dividends in July but a lot of dividends in August.




Average dividends per month: Jan-Aug  2016:
S$3,855.75 +
US$170.55   -
£148.14      -


Average dividend = Total dividend collected ÷ number of months in the year so far
Different from DK style of total dividend ÷ 12 months


Previous monthly average
S$2,736.93 -
US$187.31  +
£169.30 +

Mapletree Commercial Trust Preferential Share Offering: Got all the excess I applied for?

Mapletree Commercial Trust held a preferential share offering to fund its acquisition of Mapletree Business City at a price of $1.42 per share.

I applied for 3920 excess rights thinking that I'll only get part of what I applied for since the offering price of $1.42 was lower than market price.

To my surprise, I everything that I applied for. I  wonder what that says about investor demand for local REITs if 'free money' people didn't apply for more. People getting cautious about anyhow pressing at the ATM?

Strategy Report: August 2016 Part II

A bit too expensive now?

I am not very good at investing in upwards moving markets. As you can tell by the blog title, I prefer to buy after a crash.

I found it much easier to buy buy buy just after Brexit when everything was cheap and much harder to buy anything now since the prices have risen by so much.

In the absence of any fundamental economic shifts, I still believe in reversion to mean.

Since the last strategy report, there were 2 days more downturn which I used to buy more SAN followed by re-buying LYG at lower than my selling prices. But note that LYG went ex-Div last week. I also added a bit of BT when it dipped below $26.00 given its somewhat

defensive qualities.

But at the moment, I am sitting this upturn out. I will subscribe to scrip dividend for MapletreeLog and excess rights for MapletreeComm REITS since the upturn means that the prices for scrip dividend/excess rights is attractive.

Strategy Report: August 2016

 

For the month of August, I have subscribed to Morningstar's reports via IBKR. I was previously given a free trial and I liked the content. It costs $14.90/month, cheaper than subscribing through their website. More importantly, its very easy to switch on and off IBKR subscriptions. Since Morningstar is FA oriented, and fundamentals don't change that month, one could subscribe say, once every 3 months and not miss much.

Investing Idea: Banco Santander? (SAN - ADR)

I don't have any foreign bank counters apart from LYG and HSBC.  

US Banks will hit me with 30% withholding tax and their dividends aren't fantastic. If I really wanted US Banking exposure, it would be better to buy the SPDR financials ETF listed on LSE and with15% withholding on dividends. But I prefer to look for yield.

Banco Santander is Spain's largest bank with exposure to Latin America and the UK. It is listed on the LSE as BNC but there are also ADRs based on the underlying Spanish share. Spain has a 19% dividend withholding tax but the good news is that if you choose scrip dividend, you do not have to pay withholding tax :

• Santander Scrip Dividend

With a 5% dividend yield and  a "real"  banking business as opposed to "investment banking" (which some say is fake banking), I think that SAN is a better addition to my portfolio than another UK bank like Barclays (at the moment, no thank you) or Royal Bank of Scotland (my UK bank account is technically with RBS since they absorbed my previous bank during the last financial crisis).

So anyway, I have never been able to time the bottom and TA suggests signs of downside. But its a new month so I have initiated a position in SAN.

Footnote: Results of bank stress test: Bank stress test  - 4 UK banks were tested, LLOY best result, HSBC second, then RBS and BCS.

Dividend Report: Jan-Jul 2016

No S$ dividends collected in July, resulting in the average dividends per month plummeting to under S$3,000.

Vanguard's quarterly distribution came in this month (Jan/Apr/Jul/Oct) which increased the amount of US$ and £ collected. Some ADRs also paid dividends this month including Westpac Bank which also answered the question how much dividend withholding tax is applied to an Australian ADR. The answer is 15%, the most favourable rate possible (as opposed to 30%). 


I have also sold all my SCB foreign ETFs that declare dividend and replaced them with ETFs that reinvest dividend. This is due to the $10 minimum commission that makes it very expensive to reinvest the dividend.



Average dividends per month: Jan-Jul 2016:
S$2,736.93 -
US$187.31  +
£169.30 +


Average dividend = Total dividend collected ÷ number of months in the year so far
Different from DK style of total dividend ÷ 12 months


Previous monthly average
S$3193.08 +
US$129.10 -
£110.74 -

Last Trade for July?: LYG

I said I was in holding pattern,then suddenly on Thursday Lloyds' share price crashed. Could be linked to its announcement that its closing branches. One would have thought that cutting costs by closing unprofitable branches (you don't close profitable branches to cut costs) would have been factored into the share price. So much for the EMH (efficient market hypothesis), at least for the very short term.

Anyway, bought more LYG on Thursday at $2.81 (lower than the previous selling prices of $2.83/$2.87/$3.02 [I sold too early since it peaked at $3.10])  and today its back up to $2.87. The day is not over - it could crash again so I may need to update this post. But may I need to hold LYG longer and say $3 no sell.

But anyway, here's to the end of July and the beginning of SCB minimum $10 commissions. I failed to sell my Soilbuild REIT so its stuck in SCB. I'll just have to collect dividends from the holding until I decide to go for priority banking (no minimum commission for priority banking).

July Strategy: Holding Pattern till August

A couple of days more till the end of no minimum Commission and the start of $10 minimum for SCB. I still have not sold my tiny 2,000 soilbuild REIT shares. Probably someday after the lawsuits are settles, I will buy $5k to top-up the existing holdings. Still cheaper than regular brokers.

At the moment, I am not buying anything. Actually I wanted to pick up some Fraser's Retail bonds which I had added at $0.99 but even retail bonds have increased in price along with share prices.

Part of learning to be a good investor is to know when to pause all stock trading activity. I worry about all those investors who are boarding the "GLP boat" when it is almost touching $2.00. People already said this is a "FIFO stock", have to be very careful, but people seem to be happily loading up at $1.9x. In the long-run, they will probably be ok (but if they are only interested in long-run then STI ETF is even more ok).

After a rally, I would rather buy safe defensive stocks rather than "FIFO stocks" because the defensives usually lag the rally. Hence my interest in BT and VOD. 

I also need time to rebuild the warchest that I used during BREXIT. So I am taking a break till August unless there is major crash. I should also be able to update the dividends collected in July once the month is over.

Market might be swinging too far in one direction and pricing a higher probability of  no rate hike than is warranted.

Mid-July: Strategy Report

STI has rallied and so have other markets. In fact, UK has rallied impressively with gains in both the stock market and the GBP.

I sold some LYG as it went up to lock in some profit. At the same time, I used that money to accumulate more Vodafone to go together with my recent purchases of British Telecomms.

As  mentioned in the earlier post, when the market is bad, no point going defensive since defensive stocks won't benefit that much from a strong rally. But once the rally is underway, buying defensive stocks may be better than trying to chase the top gainers.

A strong rally is actually a good opportunity to stop buying equities and to rebalance by purchasing some bonds or simply rebuilding your reserves.

STI, not that cheap now?

But currently, STI ETF has shot up to $2.90 and above. The current fundamentals do not seem to justify this.

The explanation may be "hot money" flowing into Singapore.  Headline from Bloomberg via the Straits Times:

SINGAPORE (BLOOMBERG) - Haven buying of the Singapore dollar amid global market turmoil has pushed a gauge of its strength to unprecedented levels, putting pressure on the city's central bank to do more to support the economy.

Just because S$ is high now doesn't mean it will continue to be high in the future. In fact, the likely scenario is MAS will intervene and/or the single Fed rate hike this year (yes, some think zero rate hike) will move US$/S$ to a more normal level of around 1.4.


Like many shoppers, I take the strong S$ as an opportunity to go shopping for foreign stocks and will also put some S$ into US$ bond funds.

LYG -oops didn't close my position.

Investing Idea: Lloyds

I bought and held a chunk of LYG overnight. It was only 2 cents above my average buy price so decided to hold instead of closing the position.  The next day, LYG was one of two banks identified by analysts as "most exposure to commercial estate loans" and promptly crashed 9%.  Oops. 

Recall that property funds have suspended redemptions pending sale of assets OR have marked down the fund NAV to take into account falls in asset prices. The median cut seems to be about 10%.

I did one average down and so buy average buying price not so far away from current price.

I still feel the 'worst case' is being assumed, as is usually the case. LYG is still a buy for me but I am not all-in LYG and am still purchasing other FTSE100 dividend yielders. If it rallies, I will close my position and look to rebuy at lower price. Otherwise, I will continue accumulating.


Investing Idea: British Telecoms
Something other than Vodafone?

BT has one advantage, its not Vodafone. After Brexit, panicked investors and UK focused funds sold UK-exposed stocks and bought stocks that were not so UK focused like Vodafone. In other words, in times of panic, defensive stocks are overvalued.

• I bought a large chunk of Comfort Delgro during the last GFC, I think $1.80 all the way down to $1.30, average buying price $1.50.  During the stock market rally, CDG price hardly moved so it ended up as my worst-performing stock. Probably because during the rally, investors were selling defensive stocks and loading up on higher beta stocks. At least it gave (and still gives) a decent dividend.

Back to BT, it has definitely been sold down compared to Vodafone. Justifiably or unjustifiably, you have to do your own analysis.

I am holding VOD but I am not buying anymore at this point - its a good company, but too many investors have rushed into it as a 'defensive' move.

Brexit Day 2 onwards: Trades

Day 2 of Brexit and onwards

I continued to day-trade LYG to learn more about day-trading and closed each day's position within 24 hours. 

More important to the long-term health of my portfolio, I purchased Aviva, Prudential, and Legal & General at pretty good prices. This helped to lower the average purchase prices of these counters.

I also found out that for cash accounts, IBKR will only allow let you trade with settled cash. Meaning if you have $2k and buy and sell $2k on the same day, the amount you have to trade is $0 until the trades settle. The cautiousness of IBKR is actually a good thing.

Dividend Report: Jan-Jun 2016

Average Dividends Collected Per Month

Reaching the half year point, average dividends would have dropped excepted that CPF credited my May FCT dividend on 1 Jun instead of May.

I will no longer track dividends in Euro as I have sold all ETFs that declare Euro dividends as part of my consolidation of SCB holdings into ETFs that do not declare dividends.

However, it was a very interesting time for trading....

Edit in July: received my FCT dividends for CPF on 1 June while CDP credited in May. Will reflect FCT (CPF) dividend as paid in June instead of May.


Average dividends per month: Jan-Jun 2016:
S$3193.08 +
US$129.10 -
£110.74 -
Average dividend = Total dividend collected ÷ number of months in the year so far
Different from DK style of total dividend ÷ 12 months


Previous monthly average
S$3144.35  +
US$140.82  -
£102.944    -

€4.26

Brexit: UK trades

Bought VUKE as part of dollar cost averaging.
Bought AV as part of dollar cost averaging
Bought LYG to FIFO

First time I day traded. Always good to learn something. Not particularly 'fun' or 'exciting', so I guess I am more suited to dividend investing.

June Strategy - BREXIT: buying opportunities always come with risk

Foreign Stocks

14 Jun: I changed S$ to US$ at the start of the week and started buying ADRs of UK companies.

I considered changing to US$ less risky than changing to GBP. If I changed GBP on Monday, and didn't use up the GBP on Monday, the cost of just holding GBP would be high as the GBP would continue to drop in value which is what happened.

My focus is on companies with decent international revenues, as opposed to a company with revenues mainly in GBP. That meant I added Aviva, Prudential, HSBC, & Vodafone. I also added the Australian bank Westpac as the price was good due to the double fall of share price and A$.

Lloyds, the 'M1 of the London Stock Market' (stocks that analysts love to recommend but price goes nowhere) is more vulnerable to GBP devaluation than HSBC, but if it goes low enough, I think there is a sufficient 'margin of safety' to initiate a position. 

There is definitely a downside risk (I think the bookies put it at 30%, and bookies could be more accurate than polls which claim 50-50), but I am buying for the long term. It is not as if a company like Prudential and Vodafone would suddenly stop generating income just because UK votes to leave.

On the bright side. Brexit would also make my country retirement home in UK cheaper (if Singapore temperatures keep on going higher and higher, I think retirement I downgrade to small flat in Singapore and buy a 2nd home in a cooler country), and if I have children that want to go to UK to study, cost is also cheaper. 


Singapore Stocks

Added Ascott REIT. I have a decent position in ART and my average buying price is under $1, but looking at recent moves, including their yield acretive acquisitions, I don't think its going under $1 anytime soon. So I've taken this opportunity due to Brexit fears to accumulate a bit of ART.

GLP: Just making use of the last 2 months of no-minimum comm trading on SCB to do FIFO with this counter just for practice and to learn something about trading. Already FIFO last week, and took a new FIFO position at $1.775. I will keep some for long term and set aside some for FIFO practice till 2 August when there is no more minimum commission...

SCB: What to do with Foreign Shares?

What do we do with our SCB Foreign Shares?

Answer: Keep the forex inside SCB to avoid the forex loss, concentrate all your holdings into 1 dividend reinvesting ETF, hope for better deal from SCB.

I like blogposts that put the answer at the start in case I don't want to read the whole post.

Explanation:
If you angrily sell all your foreign shares in SCB, you get hit by the forex penalty. If you keep too many separate counters, you will get hit by multiple minimum commissions when you want to sell.

So what I am doing is to identify 1 x US$ dividend reinvesting ETF, and 1 x GBP dividend reinvesting ETF. I sell all my other foreign ETFs and use the proceeds to buy only those 2  ETFs.

At worst, if I need to sell it once the min commission takes effect, I have to pay US$10 / GBP10.

But lets be positive and look on the bright side. I am picking big cap ETFs with relatively low volatility, so I should be able to hold them for a very long time until retirement and they may well have doubled or tripled in value by them (power of dividend reinvesting). Then on retirement, I incur a one-time cost to sell and change to S$ and withdraw it.

If I were an bigger optimist, I could hope that SCB comes up with a better deal somewhere down the road (eg: $5 min comm instead of $10) because technology should make trading cheaper rather than more expensive. Who knows whether the TPP (Trans Pacific thingy) will result in more competition from foreign brokers and lower prices.

On the other hand, people say SCB can introduce custodian fee for foreign shares. But I already have my exit strategy, since I only have 2 ETFs, the commission I have to pay is much less (vs my earlier pokemon collection of 8 ETFs [yikes])

Its ok to sometimes take the long view, but make sure all your eggs are not all in the SCB basket :)


Explanation: Why Dividend Reinvesting ETFs?

One of the attractions of no minimum commission is that it was easy to reinvest the small dividends I received from my ETFs. Most ETFs pay quarterly dividends so it was good that we could reinvest dividends simply by buying 1 or 2 shares (probably loss-making for SCB since they have to print contract note with colour letterhead, put in envelope, and post it to us).

Minimum commission makes it almost impossible to reinvest dividends. That means either leave the forex in the account earning hardly any interest, or changing the foreign currency to S$ and get hit by the bid-offer spread.

Because of this, you should not hold any ETF that declares dividends in a foreign currency in SCB.

More details

This month, I have identified the 2 ETFs I want to keep in SCB and hopefully only withdraw them on retirement:

US$ IWDA - World ETF, part of Shiny Thing's recommended portfolio.
XESC - Euro Stoxx 50 ETF, because the Euro Stoxx 50 has a decent dividend yield of 3% (which will be reinvested), and the companies are big and mostly well-known international giants.

My SCB portfolio is mainly GBP, so most of the selling was GBP denominated ETFs. I started slowly selling my other ETFs and got a little bit lucky that after I sold the ETFs, the prices of shares dropped by 1-2%, so I could buy XESC a little cheaper and help to offset the 0.25% sell and 0.25% buy commissions that I was resigned to paying...

Interactive Brokers or Standard Chartered

Before: SCB no minimum commission

I started off with SCB online trading for foreign shares because there was no minimum commission. But soon, my monthly investment in foreign shares made more sense for me to use interactive brokers for foreign shares. The reason is the forex spread.

If you changed $2000 of $S to US$, and immediately changed back from US$ to S$, you will end up with $2000 minus 2.27% = $1944.60.  Meaning SCB takes about S$55 (there is a post in HWZ where user Chopra helpfully posted a table of the various bid-offer spreads.

If you used IBKR to buy and immediately sell, IBKR will take US$2x2=4 comms and you lose maybe 0.1% (or less) to the bid-offer spread, meaning you lose maybe S$10. (rough estimate).

If you change bigger amount, you lose even less. Because whether you change S$2,000 or S$5000, IBKR charges US$2 per forex trade. When you go to large amounts, the comm slowly goes above US$2. At S$15,000, IBKR's comm is less than US$3.

When you see the SCB forex costs, you can see why the IBKR 'activity fee' of US$10 a month is no problem for those that change S$2000 a month because the forex savings is much higher than US$10.

Eventually, you should hit US$100k portfolio size and activity fee is waived after that. Then you can sit back and enjoy your dividends which can be converted back to S$ with minimal forex loss.


After: SCB minimum commission

After SCB introduced its minimum commission, there is even less reason to use Standard Chartered if you are a regular investor who buys some shares every month.

SCB: Minimum US$10 commission per trade plus high forex spread. When you reach US$100k you still have to pay. (2020 update - forex spread is now 0.4%)

IBKR: Pay US$10 a month, and get 5 free trades and low forex spread. When you reach US$100k, no need to pay.

What most people don't notice is that the IBKR US$10 activity fee is equal to about 5 trades of US$ denominated counters in the London Stock Exchange. Each time you buy or sell US$ counter on LSE, the commission is US$1.94.

This means even if you only have $1,000 to invest per month, you can buy IWDA, EIMI, and LQDE (World, Emerging markets, US corp bonds) and you only pay the minimum activity fee of US$10.

If you bought IWDA, EIMI and LQDE on SCB you pay US$10 x 3 comms and the forex spread.



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FAQ on the Interactive Brokers minimum activity fee
It's on their excellent website, but people always like to ask to make sure.

Every month, IBKR requires you to trade so frequently that you generate US$10 (or equivalent) of commissions. I'm pretty sure it also includes the comm for changing your S$ to US$. So this is what you can do every month for the US$10 that you pay:

• Changing S$ to US$ - US$2 comm.
• Buying 1 share or 10 shares of IWDA - US$1.94 comm (Min comm for US$-LSE)
• Buying 1 share or 10 shares of EIMI - US$1.94 comm (Min comm for US$-LSE)
• Buying 1 share or 10 shares of LQDE - US$1.94 comm (Min comm for US$-LSE)
• Buying 1 share of GLD (Gold ETF) - about US$0.30 comm (No min comm for US shares)
• Buying 1 share of BRK.B (Berkshire Hathaway B US$140) - about US$0.30 (No min comm for US shares)

 The minimum activity fee does not include live data. Live data is not critical. Google finance has real-time last done data. So you are quite safe to put a buy price 2-3 bids before last done price and slowly adjust upwards. It is very easy to do real-time amendment of IBKR orders.

Initially I subscribed to UK Live data at GBP5/month for a few months. But since I only bought boring slow moving ETFs, I found that the prices really didn't move that much so live data was really not necessary, so I stopped paying and just placed orders 2-3 bids lower than Google last done price and then slowly move up.

Core-Satellite Portfolio

Because belief in one's ability is not the same as actual ability


There are people who push a particular stock very hard and there are also overly bullish analyst reports (eg: STI Long term P/E is 15, but this stock P/E only 10 so price should increase by 50% so that the stock P/E is also 15 or something like that - this kind of analysis I also can do).

These people have strong belief. But strong belief does not equal to investing ability.


Many studies have shown that stock-pickers do not outperform the market.

One of the first lessons you learn is to treat stock recommendations from the internet with a pinch of salt. It is really not a good idea to ask for stock recommendations on the internet. At best, you follow the crowd (eg: the China craze before the crash). 

Taking things with a pinch of salt doesn't mean ignoring them totally. You should read analyst reports because there is always useful information in analyst reports, just take liquid paper and blank out their target price. (I think this is covered in some investing psychology textbooks).


Introducing the Core-Satellite Portfolio

Shiny Things in the forums advocates an ETF based portfolio since studies have shown that investors don't outperform the market. But stock-picking is interesting. How to balance the two?

As a compromise, you should have a core-satellite portfolio. The core being the STI ETF and the satellite portfolio which are your stock picks. The concept is so simple I hopefully don't need to say any more :)

The satellite portfolio can also reflect your interests. If you are a dividend investor, you would pick stocks that have higher dividend yield than the STI ETF. 

If you are into growth, you would pick growth stocks even though their yield is less than the STI ETF.

A little foreign exposure wouldn't hurt but that's made more difficult by SCB not have minimum commission. The compromise would be to look for local counters that derive most of their income from overseas. 


Bonds in your Core-Satellite Portfolio & Intelligent Rebalancing

Finally, you should hold some bonds. Shiny Things seems to be the lone supporter of holding bonds (he's releasing an e-book by the way, will update with his link when I have it) and I fully agree with him. Bonds will reduce volatility in the portfolio and also provide reserves that can be sold in case you need to rebalance during a crash. 

Eg: $10000 equities, $2000 bonds. If equities crash to $5000 and bonds increase to $2500, you would sell bonds and buy more equities to maintain the 5:1 ratio.  

Incidentally, this is a reason why the unit trust First State Bridge outperformed many 100% stocks only stock-picking investors despite the fact that it holds about 50% bonds. 

Intelligent rebalancing - when stocks are cheap, deviate slightly from the target 50/50 and go to 60/40 in favour of equities, when market recovers, sell off equities and reset to 50/50. Again, I don't know the full details of the fund's transactions but from their public information, this is what they did...

This is a mistake people make by dismissing unit trusts as no good, they also feel there is nothing to learn from unit trusts - I say, there is something to learn from unit trusts like First State Bridge which has delivered very good long term returns - which is their intelligent rebalancing strategy


Remember, the route to becoming a better investor is to have an attitude that there is always something to learn and not to ignore things you label as 'lousy' (unit trusts, analyst reports).